The real estate sector got a much needed boost in investor confidence this week after news that Warren Buffet's Berkshire Hathaway (BRK-A) has taken a nearly 10% stake in STORE Capital Corporation (STOR), a real estate company that invests in single-tenant properties. In this article, we'll take a look at several charts from within the real estate sector to see if the patterns confirm that now is a good time to follow Warren Buffet's lead and buy real estate stocks. (For more, see: Active Traders Turn Bullish on Real Estate.)
When it comes to investing in a broad basket of quality real estate companies, many investors turn to the iShares U.S. Real Estate ETF. As the name suggests, the fund's managers seek to track the performance of an index composed of U.S. equities in the real estate sector. The fund comprises 126 holdings and has total net assets of $4.65 billion. Taking a look at the chart, you'll notice that the bulls were recently able to send the price above the April high of $80.47. The recent breakout suggests that the momentum is in favor of the bulls, and it will likely remain bullish until the price closes below the long-term support of the 200-day moving average, which is currently trading at $76.47. This chart is a textbook example of the type of bounce that active traders expect when the price nears a major level of technical support, as shown by the blue arrow. (For more, see: Real Estate Investing: A Guide.)
With a weighting of 5.47%, the largest holding of the IYR ETF is American Tower Corporation. For those who don't know, American Tower Corporation invests in real estate across the globe and is regarded as the world leader in wireless communications infrastructure. With a market capitalization of nearly $60 billion, there are few companies with the breadth of operations to be able to compete effectively. Taking a look at the chart, you can see that the price has recently broken above a key level of resistance on heavy volume. This type of breakout is a common technical buy sign and will likely trigger a move higher in the coming weeks. (For more, see: Exploring Real Estate Investments: What Is Real Estate?)
When it comes to real estate investing, one of the most well known names is Simon Property Group. This company also has a market cap of nearly $60 billion and holds real estate assets around the globe with a concentration in regional malls, outlets and community/lifestyle centers. Based on the chart, you can see that Simon Property Group stock has been a laggard in the sector for the past several months, but the recent close above the descending trendline suggests that the bulls could be taking over. From a technical analysis perspective, it appears as though the price has little standing in the way of a move higher until it faces the horizontal trendline near $174. (For more, check out: Analyzing Chart Patterns.)
The Bottom Line
The real estate sector has been capturing significant attention over the past week because of Warren Buffet's recent investment. Based on the bullish patterns shown above, it appears as though the charts are in agreement that now is a good time to buy. (For more, see: 3 Charts That Suggest Now Is the Time to Invest in Real Estate.)
Charts courtesy of StockCharts.com. At the time of writing, the author did not own any shares in the products mentioned.